Wednesday, March 30, 2016

The announcement by CBS Chairman Les Moonves to look into various ideas to “maximize shareholder value” in regard to the company’s radio division led to numerous statements by industry observers that the stations would be sold, perhaps as a unit, perhaps individually. I don’t see that happening (see this column last week) but it does allow for some reflection on the state of the industry.

First off, radio is dead. The experiment in allowing unlimited numbers of stations to be owned by a small handful of companies has not resulted in benefits to either consumers nor owners. Not even advertisers.

Instead, large radio companies have found themselves saddled with huge debt loads they can’t repay. Radio’s most valuable asset -- creative talent -- has been cut to the bone causing extremely talented personalities, programmers and managers to leave the industry outright, with few to take their places. Every major company -- including iHeart Media and Cumulus, as well as CBS -- have seen advertising revenues tumble, leaving them vulnerable to all sorts of problems, while cuts in talent and promotions have caused creativity and competition to decline, causing people to seek out other means of entertainment.

To make matters worse, many stations have added to the number of commercials each hour, diluting the value of each spot and making advertising effectiveness decline.

The net result? Companies like iHeart Media and Cumulus are currently trying to convince debt holders to finance a new house of cards in order to give them more time ... most likely to fail as they fall into bankruptcy ... and CBS -- the crown jewel of corporate broadcasting -- is trying to figure out what to do.

If it sounds like I’m down on radio, you’d be wrong. As it turns out, recent events in the industry -- especially the announcement from CBS -- actually have me hopeful than in years that things will turn around, and radio can thrive once again. Essentially, CBS is sending out the message that deregulation has indeed failed, but that market conditions will do what the FCC has been unable to do: bring back rational ownership limits. Radio is not dead after all; I believe it may be ready to soar.

I see it this way: a company with hundreds of stations cannot possibly focus as it needs on content and sales. Resources are just spread too thin. As companies are forced to divest of stations to pare down debt or free resources (and the formerly corporate-owned stations go independent or to small companies) managers can focus on content, truly compete, and bring listeners back.

Call it a radio renaissance.

As in all businesses, radio thrives when it competes. Deregulation and the removal of ownership caps allowed companies to set up virtual (and real) monopolies. What’s the difference between KOST (103.5 FM) and KBIG (104.3 FM)? Besides frequency, not much. Because both are owned by iHeart, they don’t compete so much as try to be different enough to attract listeners while not taking listeners from each other. Far from the days when KMET (now KTWV, 94.7 FM) and KLOS (95.5 FM) would try to out stunt each other for attention. it’s what made radio fun.

My hope is that the anti-consolidation trend continues. I don’t necessarily want any company to dissolve (though I would not be heartbroken if they did). If no company owned more than two or three stations in a market, it would go a long way toward bringing back the competitive forces that fostered creativity, fun and a variety of formats that are currently not being heard.

In my opinion, radio done right cannot be beat for entertainment. Sure MP3 players and online music services are good, for music. But they can’t match the local content and live personalities found on radio. Stations like The Sound (100.3 FM) have even added more personality in the last few months. I find online services frankly boring. And the fact that so many people stay with radio in spite of the industry’s recent problems shows the potential to bring radio back to greatness is huge.